Nearly three months after closing the biggest merger in its history, SAP has set the dual challenge of integrating Business Objects' BI tools more tightly with its enterprise resource planning software while also maintaining the independence of those tools to appeal to non-SAP customers.

The man in charge of this balancing act is John Schwarz, the former CEO of Business Objects who now heads the new BI division at SAP. Schwarz sat down with IDG News Service recently to discuss the integration plans, the future of BI, the emergence of Microsoft as a competitor, and why BI is still so hard to do. As reported separately last week, Schwarz also talked about SAP's plans to retire some overlapping products. Following is an edited transcript of the interview:

IDGNS: You announced your first joint offerings in January -- nine packages of SAP and Business Objects software -- but you plan much tighter integration in the future. Can you talk about those plans?

Schwarz: I'd be happy to, but I want to make another point first, which is that while we're integrating (Business Objects capabilities) into SAP as tightly as we can, we're giving an equal level of priority to not integrating in such a way that we can't sell outside the SAP domain. So the Oracle, IBM, and Microsoft customers are just as important to us as the SAP customers.

Given that, there are some obvious things we have to do and then some interesting things that we are doing because they'll add a lot of value. The obvious things are we need to integrate so that customers who have SAP NetWeaver and SAP BW [SAP's data warehousing and BI platform] can use the Business Objects content seamlessly without having to build bridges or connectors. We used to link using connectors and special bridges because we didn't have access to the technology; now we can use the components that are part of the SAP SOA architecture so that we're integrating directly to those interfaces. So as it relates to access to information, there's going to be a direct link from XI -- our Business Objects platform -- to BW as it is today, but directly, natively integrated. We will integrate using NetWeaver where appropriate, without dragging NetWeaver along into an independent Business Objects installation.

We are also borrowing technology [from SAP] called Business Intelligence Accelerator, or BI Accelerator, an in-memory data management tool that was built by SAP primarily to improve the performance of access to massive data structures inside BW. We have attached to BI Accelerator our query and our search capability, we will probably also attach our OLAP client, so we'll be able to do queries or search or slicing-and-dicing of the in-memory data cube with lightning speed. Ultimately, I'd like to use the technology outside of the SAP BW context as well, so we'll have the ability to do in-memory analytics everywhere, so that's a very exciting development on the BI side.

IDGNS: What will that mean for the non-SAP customers?

Schwarz: Obviously, the value of BI Accelerator is performance, it's having access to large volumes of data quickly, so if you take a look at a typical data warehouse at a large company, they'll have billions of rows of information, often with many hundreds of columns of data in each row. When you start to do global search or start building reports that have to read all that data, the performance starts to be a significant barrier. So the more we can do to make access to that information really instant, the more the data becomes useful.

We are also working in the data integration area to share componentry in the Master Data Management solution. So SAP has a Master Data Management solution that's currently built primarily to underpin the collection and migration of data into the SAP processes, but we'd like to use it as a way to manage all of the data in the enterprise, whether it's SAP or non-SAP.

IDGNS: What's the timeframe for that?

Schwarz: There will be a continuing stream of improvements coming out in MDM, but because it's such a relatively new field it's hard to predict when there's going to be a definitive end-to-end MDM solution. Right now, we're focused on the PIM [product information management] side because that's where it grew up from. We'd like to deliver a CRM version of MDM and ultimately an HR version for employee data. There's a lot of development going on, I'm just not able to give you a date and say that by the end of the year it will be finished. I doubt if that's likely to be the case.

IDGNS: You have two goals with this merger: To integrate Business Objects technologies more tightly with SAP, but also to stay independent and work with non-SAP platforms. They seem like conflicting goals; how do you reconcile them?

Schwarz: Let me start by explaining the business justification. Business Objects is coming to SAP with more than 70 percent of its revenue based on non-SAP environments. SAP did not spend more than $6 billion to lose 70 percent of the revenue that Business Objects brings to the table; it's essential to maintain the run rate in our business. So we're very committed to it on that basis alone. Secondly, SAP's justification for buying Business Objects was at least partly to increase its own addressable market, and how better than by going after platforms that are non-SAP?

Now, you are right, as you go after this broad market there are trade-offs. The trade-offs are mitigated by SOA. SAP is committed to SOA architecture across the board; all of the services that one needs to see and integrate into SAP are now surfaced using SOA interfaces, and that makes it easy because Business Objects was also an SOA-architected business.

IDGNS: I can see the business incentive, but the challenge is to say independent while giving [SAP CEO] Henning Kagermann the tight integration that he's looking for.

Schwarz: Yes, but I think in that context my challenge is no greater than Rob Ashe's [the former CEO of Cognos, now part of IBM]. IBM is a very neutral company and wants Cognos to support DB2 [IBM's database] as well as Oracle. If you really want to have a BI component inside a large software company, you've got to let the BI component live as it did before, otherwise you destroy its value. Maybe that's not so important for Oracle and Microsoft, who are focused on a vertical stack, so Hyperion may have a tougher time in that regard than we do.

IDGNS: Do you see Microsoft emerging quickly as a competitor? They're adding a lot of BI capabilities to SQL Server and tying that to Dynamics.

Schwarz: Microsoft is a credible competitor -- certainly, the technology they are developing for individual users or individual applications is interesting. It's not an enterprise solution yet. Will it ever get there? We'll see. We work with Microsoft -- they OEM some of our technology inside their portfolio, so it's a good relationship. I could see a road map that says we will continue to partner and grow more integrated as we work with a new Office suite and as we work with SharePoint and build collaboration using their tools, or I could see us moving into more of a competitive direction if Microsoft is unwilling to cooperate or if they insist on adding functionality that gets more and more competitive. That road is open, too.

IDGNS: CIO magazine just published an article entitled, "Business Intelligence: A technology category in tumult." These big BI mergers -- Oracle-Hyperion, IBM-Cognos, SAP-Business Objects -- create uncertainty for customers about road maps and where the technology is heading. Why would anyone risk starting a major BI project today?

Schwarz: My experience with customers is that they can't wait. The business drivers for BI are so dramatic and so pressing that no one waits just because they are uncertain about what the vendors are doing. They simply drag us in and have us explain what's going on.

IDGNS: BI vendors talk about how businesses can improve performance by analyzing data from multiple sources, but when you talk to IT people, they say it's hard to get even two clean, reliable sources of data for real-time analytics. Why is BI still so hard to do?

Schwarz: The fundamental problem rests in the following: There are on average, in any sizeable organization, six systems that deal with customers -- you've got tools for selling, order processing, billing, maintenance, and marketing. These systems were traditionally built independently, and each has its own way of describing a customer. So this data is to some degree incorrect, and reconciling which of these systems is the primary, accurate representation of the business is very hard. So the idea of master data management, which in essence is not a tool issue but a political issue -- figuring out who is the real owner of the information -- is where the real problem arises, and it's different for every customer. So it's hard to come up with a solution that says, out of the box, here's what you do. You need someone to do the analysis to understand what the sources of data are, how good the systems are that produced that data, which of the systems holds the real canonical version of that information, and then align your systems to that one. Because you can clean up your data once, but if the underlying systems that created the data remain the same, a nanosecond later you need to clean it all again.

IDGNS: Oracle CEO Larry Ellison has said you can overcome this problem by putting all your data in an Oracle database, but obviously that won't work for all customers. So are we just left to struggle with this problem?

Schwarz: I think we are. It's good for our business, by the way. The interesting thing is that many customers can't agree among themselves. I had dinner last night with four CIOs who represented four divisions at a large customer. They are to some degree different businesses, but at the end of the day, they deal with the same end consumer, even though the consumer has four different relationships with the company. They would like to get a single view of the consumer, and there isn't a power in their organization who has the right to decide which is the right view. So they struggle and they compromise and they build subsets of those views that they try to reconcile, and even that's hard to do.

IDGNS: Having good tools is only one part of doing BI. There is also governance and how a company should architect its systems. How much of a role should BI vendors play in telling customers how to design their IT?

Schwarz: A very large role because BI is wholly dependent on access to information. If the information is not available or architected poorly, or incorrect for that matter, which is 90 percent of the problem, the BI doesn't deliver any value. So the ability to create a trusted broad universe of information is a fundamental success factor for the customer, which is why we went after the EAI market ourselves, because we didn't want to depend on other players to do it for us.

IDGNS: So what advice do you give them about the ways to architect their system?

Schwarz: We try to deliver reference examples of other customers who have done this successfully, we work with our partners who make their living designing data environments, partners like BackOffice Associates, a premium MDM solutions provider, to make sure their tools are mapped to ours in a way that makes the solution easy. There are some fairly intellectually intensive techniques that are brought to this problem because it's not a tools issue, it's a design issue.

IDGNS: You've talked about creating a closed-loop process where SAP users will be able to draw from real-time BI data at key decision points in a business process. What does that mean?

Schwarz: That closed-loop process is where we try to link the management of strategy to the management of the execution of day-to-day business processes and ultimately optimize those processes by understanding, in real time, how well they are delivering results.

What we now need to build are the analytics that will give the business user the opportunity to understand how well is the process performing and how well is the data supporting decisions that the user might want to make. There are already many analytics embedded inside the SAP suite, but we need to add more, we need to make the analytics more industry-specific, and we need to make the analytics more intelligent. We need to give managers a broader perspective. Today the analytics tend to be buried inside the process, they tend to be very single-process specific, so you get a lot of data out, but the synthesis still has to happen in the human mind. We'd like to begin to synthesize bigger pieces of it and deliver analytics that are more useful to a decision maker. That work is under way right now. We have people across 26 different industry sectors who are building the knowledge and the analytics that are required to bring value to the customers.

IDGNS: Forrester Research Analyst Boris Evelson said the only way BI will become really pervasive is by integrating it tightly with business processes. Instead of having a separate BI portal, an analytics tool will pop up at key decision points in a business process. How do you see the future of BI? Will we always have stand-alone BI, or will it merge into the background?

Schwarz: You have two types of BI. What I think Boris is talking about is in-process analytics, and I think it's essential, and we are doing our piece of that as I'm sure will the other application providers. However, in order to do what we talked about, which is linking strategy to execution and giving them this closed-loop process, you need to see all your processes operating in concert end-to-end. So, yes, you can instrument any one process in the series and get a view of what that process is doing, but the process may be perfectly fine. If the linkage of the processes is not working well, then the outcome will not be good. So the value of having an independent BI that can span all these different things and give you the predictive analytics and the model to understand your end-to-end business is just as important as these in-process analytics.

I would argue that there are many BI apps that have nothing to do with the underlying process. Think of a call center, where you want to do an analysis on the sentiment of the people calling in. The process that manages the call might be OK, and you might get analytics on how fast they take you to dispatch or how long did you have to wait in queue, but in order to say if you've dealt with a thousand customers in a day and that, in their spoken words they all talked about a certain issue that wasn't necessarily registered in the process itself, how do you get that info out? So those kinds of BI solutions that are the higher-order capabilities are just as valuable as the embedded BI that Forrester's talking about.

After weeks of speculation, it appears that the general public will soon be able to get its hands on the first beta of Microsoft's follow-up to Windows Vista. A message on the MDC (MSDN Developer Conference) site states that all attendees of the upcoming MDC events, a series of Microsoft-sponsored road shows running from early December through mid-February, will receive a Windows 7 Beta 1 DVD in the mail "when they become available."

Microsoft isn't giving an exact delivery date for the Windows 7 beta, but some reports speculate the disc will be ready before January 13.

[ InfoWorld's Randall C. Kennedy and OSNews' Thom Holwerda debated the best way to assess Windows 7's changes ]

Some bloggers, the few who've actually tested the pre-beta code, have voiced concerns about the Windows 7 feature set. Infoworld's Randall C. Kennedy, for instance, recently declared that Windows 7 was essentially a slightly tweaked version of Vista. Other reports have praised-with some reservations-Windows 7's interface improvements, such as a vastly remodeled Windows Taskbar.

Microsoft has indicated that Windows 7 will likely be ready by late 2009 or early 2010, and given the lack of spectacular new features in Vista's replacement, there's no reason to think that Redmond won't meet that timeline. Certainly, the average Vista user would be thrilled if the hated User Account Control security feature would simply go away. Early indications are that it won't, but UAC will undergo some major changes in Windows 7.

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IT vendors may be growing increasingly desperate amid the global economic downturn, but customers must employ a range of tactics -- not just bullying -- to extract cost savings from them, a group of Forrester Research analysts said during a client teleconference Wednesday.

Companies simply can't use a shotgun-style approach and expect to succeed, said software licensing analyst Duncan Jones: "Anything that is undifferentiated, like a general letter that goes out [to vendors] saying we've got to cut everyone's maintenance by 10 percent? That's not going anywhere."

[ For more on how to deal with the recession, check out InfoWorld's special report: IT and the financial crisis. ]

Analyst Paul Roehrig, who focuses on outsourcing and IT services, said it is difficult and awkward to extract price concessions on a signed contract.

"Either you're begging or threatening.... Those [tactics] tend to work, but only for a short time," he said, adding, "unless you're really overpaying, there's really not that much room in the provider's margin where they can lower the price point without changing the service level."

And if a customer does succeed in lowering its services costs, "the vendor is going to immediately substitute junior people," said analyst John McCarthy, whose coverage areas include offshoring.

Instead of begging for a rate cut, customers could instead ask their vendors to assign more seasoned workers to their projects, resulting in productivity gains and cost savings, McCarthy said.

Meanwhile, the tactics are different for software licenses and maintenance agreements, according to Jones.

"One of the problems is, you're dealing with a software rep who has different goals than you. He needs to sell new licenses and has no interest in helping you cut costs," he said. "But if you get up higher in the organization, there are going to be people who care more about the long-term relationship, and there's flexibility there."

That said, now is the time to push for bigger discounts on new licenses, as sales representatives "are desperate to meet their number by end of the year," Jones added.

Companies could even indicate they'd be happy to let any outstanding deals float over into 2009, he said: "That will probably be too late for the rep, so try it as a tactic and see how much flexibility you've got."

Also, customers could use money they're prepared to spend on new software as leverage, Jones said: "Anything you're trying to get, like cutting maintenance on products you're not using, you might be able to get that as a quid pro quo for spending in another area."

Beyond maximizing their buying power, companies should save money by determining which software assets no longer need a maintenance contract, Jones said: "You save costs with minimal impact on the business, but you put pressure on other vendors because it shows you're seriously looking at everything."

A similar approach should be taken to IT services contracts, Roehrig said. "If you're asking for the highest levels of service, you're going to be paying top dollar, when the reality is that the enterprise can function just fine with not everyone having gold-plated service."

Companies should also try to get more value out of outsourcing in general through strategic hiring, he said. "If I had money as a client to invest in one thing ... I would get someone who really knows how to manage a service provider. Some of the best outsourcing deals I've come up against have really good people who know how to get a service provider to do what you want."

Customers should also seek to lower the total number of service providers they contract with, leading the way to bigger volume discounts, Roehrig said. But he noted that this can be difficult for heavily federated organizations to accomplish.

It's also possible to save money by actually helping one's vendor cut costs, according to Jones.

If four divisions within a company are negotiating separately with a vendor, they should consider consolidating those relationships, he said: "I would go to the vendor and say, how can I earn cost reductions by dealing with you in a centralized fashion?"

Microsoft on Wednesday unveiled a free plug-in for Firefox to translate Open XML documents, an update to its document translator, and a toolkit for Java developers that was built under the umbrella of its Document Interoperability Initiative.

The group released the OpenXML Document Viewer as an open source project on its Codeplex Web site. The viewer translates documents in the Open XML format, which became an ISO standard in April after much contentious debate , to HTML so they can be viewed on a browser. The viewer, which is still in the preview stage, eliminates the need for a user to install Microsoft Office or any other productivity tool set.

[ Discover the top-rated IT products as rated by the InfoWorld Test Center. ]

The first implementation developed by MindTree and Microsoft works with Firefox 3.0 running on Windows or Linux and translates font types, images, text styles, diagrams, tables, and hyperlinks. In early to mid-2009, the project will add support for Opera and add server-side features.

The software was released during a Document Interoperability Initiative (DII) meeting this week in Belgium.

Microsoft created DII in March with the help of Novell, Mark Logic, Quickoffice, DataViz, and Nuance Communications. The goal was to foster interoperability between document formats, most notably Open XML and the Open Document Format (ODF).

"Basically this is Microsoft sincerely going out and following up with what they did with OpenXML," said Peter O'Kelly, principal analyst with O'Kelly Consulting.

As part of that follow-up, Microsoft plans to support ODF in Office 2007 SP2, which is slated to ship next year.

On top of the Firefox plug-in, DII released Version 2.5 of the Open XML/ODF Translator , which supports Office 2003, 2007 and XP. The new version includes a set of ODF 1.1 compatible templates and chart enhancements for spreadsheet programs.

The templates provide preformatted documents, such as a business letter or fax sheet, that are based on either ODF or Open XML and allow predetermined conversions between formats.

DII also introduced an software developer kit for Java developers that aids in working with Open XML documents. The project aligns with the Apache POI project, which provides Java libraries for reading and writing in Microsoft Office formats.

All the DII software was released as open source projects.

"We have been seeing that a lot of people now understand that what is most important is the end user," said Jean Paoli, general manager of interoperability strategy for Microsoft. "Since for maybe a year now, we are seeing far less passion about the format issue and more rationality."

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Scotland is to host two pioneering datacenters, with plans being announced to build an eco-friendly cloud centre in Inverness, and the world's largest computing facility in Lockerbie.

A new business park, a "sustainable village" with hundreds of homes and what is claimed to be the world's largest datacenter, are to be built in the south-west of Scotland under an ambitious £800 million development plan.

[ Find out more on being environmentally responsible while saving money. And stay up to date on green tech with InfoWorld's Sustainable IT blog, with our Green Tech Topic Center, and with the Green Tech newsletter. ]

The Peelhouses datacenter in Lockerbie, which is being built by Scottish firm Lockerbie Data Centres, will use green energy generated from wind turbines and a new bio-mass power station.

The entire facility will be spread over 250,000 square metres, including the development of 800 new homes in the village. Waste heat generated by the banks of computer servers will be reused to heat the new village as well as the existing town, and the business park

Scottish IT services company Alchemy Plus, with backing from Microsoft, has revealed plans to build a £20 million cloud computing center on the Inverness harbour. Inverness was chosen as an ideal site for the large computing facilities because of its cold climate, which Alchemy intends to harness to reduce the need for cooling.

[ Learn more about what cloud computing really means from InfoWorld's cloud computing primer. ]

The 20,000-square-foot facility is billed as Scotland's first eco-friendly computing facility, with the heat created by the center being used to warm nearby businesses, including a nearby hotel.

The Inverness center will operate on a cloud computing model, enabling users to subscribe on a monthly basis for the IT resources their businesses uses. Alchemy claims this companies that took part in an 18-month pilot saw an average cost savings of 28 percent.

Lockerbie Data Centres still waiting for planning permission of its plans, but chief executive John Hume said he had already received interest from a number of IT firms keen to get involved with the project.

Hume said: "The worldwide shortage of suitable data storage and the high demand for local affordable housing presents a unique opportunity for Scotland and local residents."

"With global demand for data storage expected to double by 2012, demand already outstrips supply."

Chief executive of Alchemy Plus, Peter Swanson, echoed similar sentiments on the demand for datacenter space. "The current economic downturn is driving a rapid shift towards cloud-based services which offer greater economy and flexibility."

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VMware has introduced View 3, the updated version of its virtual data infrastructure (VDI) offering. The company claimed that the new product would reduce desktop storage demands by as much as 70 percent.

In addition, the company said that it could "decouple" a desktop from specific locations to create a personalized view of that desktop, accessible from any other device -- so that a desktop could now be visible from a laptop in another office.

[ Read about VMware's VDI Storage Considerations guide. And stay up to date on the latest virtualization developments with InfoWorld's Virtualization Report blog and newsletter. ]

Jocelyn Goldfein, VMware's global manager for its desktop business said that the move supported the current trend towards mobile working. "Users are no longer tied to a desk," she said. "They use PCs, thin clients, notebooks or even smartphones."

Goldfein said that View3 was part of the vClient initiative announced at VMWorld. She said that the company was now looking at the desktop in the same way that it had looked at the datacenter. "The problem with desktop virtualization is that you still need a device. When you consolidate in a datacenter, you can get rid of 90 percent of the servers, you can't do that with the desktop." She added that View 3 would help bring virtualized desktops to devices.

The main element in View3 is View Composer. This uses a new technology called Linked Clone to generate many virtual desktops from a master image. Only desktops could be created in seconds and centrally controlled by View Manager.

Tommy Armstrong, VMware's senior marketing manager for enterprise desktops said that View 3 users would be able to provision many machines with common software -- for example, Windows, with that "golden master" as VMware calls it. He said that this could also be used for patch management.

In addition, the company has released Offline Desktop, a feature that provides the means to securely move virtual desktops between the datacenter and a local laptop or desktop. The company claimed that this would enable users to "check out" a virtual desktop onto an ordinary PC, such as a laptop, run the virtual desktop locally, and then check it back in to the datacenter.

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